Exxon Lagging BP Following $35 Billion XTO Natural-Gas Gamble

the largest U.S. natural-gas producer since its acquisition of XTO Energy Inc. last year, is slowing drilling in Texas gas fields amid a supply glut that slashed prices for the fuel.

Chief Executive Officer Rex Tillerson may be pressed at tomorrow’s annual meeting in Dallas to show that the $34.9 billion XTO purchase -- Exxon’s largest transaction since he became CEO in January 2006 -- hasn’t been a bust, said Manuj Nikhanj of Ross Smith Energy Group Ltd.

Since Exxon completed the XTO acquisition on June 28, Exxon shares have lagged Chevron Corp., ConocoPhillips and even BP Plc (BP/), operator of the deep-sea well that triggered the worst-ever U.S. marine oil spill last year. All those companies have benefited to a greater degree than Exxon from rallying crude prices.

“It’s a gas bet that obviously hasn’t worked yet,” Nikhanj, an analyst at Calgary-based Ross Smith, said in a telephone interview. “Exxon isn’t making any money off the commodity that XTO was known for.”

North American energy markets were flooded with gas after new drilling techniques allowed producers to tap into previously inaccessible geologic formations. U.S. gas futures tumbled as much as 30 percent in the months after the acquisition closed in June, and remain down 7.7 percent.